ECONOMIC REFORMS AND WELFARE SYSTEMS IN THE USSR, POLAND AND HUNGARY

Transcription

1 ECONOMIC REFORMS AND WELFARE SYSTEMS IN THE USSR, POLAND AND HUNGARY

2 Also by fan Adam WAGE, PRICE AND TAXATION POLICY IN CZECHOSLOVAKIA, WAGE CONTROL AND INFLATION IN THE SOVIET BLOC COUNTRIES EMPLOYMENT AND WAGE POLICIES IN POLAND, CZECHOSLOVAKIA AND HUNGARY SINCE 1950 ECONOMIC REFORMS IN THE SOVIET UNION AND EASTERN EUROPE SINCE THE 1960s EMPLOYMENT POLICIES IN THE SOVIET UNION AND EASTERN EUROPE (editor)

3 Economic Reforms and Welfare SystelDs in the USSR, Poland and Hungary Social Contract in Transformation Edited by Jan Adam Professor Emeritus of Economics The University of Calgary, Canada Palgrave Macmillan

4 ISBN ISBN (ebook) DOI / Jan Adam, 1991 Softcover reprint ofthe hardcover 1st edition 1991 All rights reserved. For information, write: Seholarly and Referenee Division, St. Martin's Press, Ine., 175 Fifth Avenue, New York, N.Y First published in the United States of Ameriea in 1991 ISBN Library of Congress Cataloging-in-Publieation Data Eeonomie reforms and welfare systems in the USSR, Poland, and Hungary: social eontraet in transformation/edited by Jan Adam. p. em. Inc1udes index. ISBN Publie welfare-soviet Union-Congresses. 2. Soviet Union Eeonomie poliey Congresses. 3. Publie welfare-poland Congresses. 4. Poland-Eeonomie poliey-1981-/-congresses. 5. Publie welfare-hungary-congresses. 6. Hungary-Economie poliey-1989-/-congresses. I. Adam, Jan, HV313.E de CIP

5 Contents List of Tables List of Figures Acknowledgements Notes on the Contributors Preface vi Vll viii ix xi 1 Social Contract fan Adam 1 2 Drastic Changes in the Soviet Social Contract fanet G. Chapman 26 3 The Social Contract: Soviet Price and Housing Policy Elizabeth Clayton 52 4 Health Care in the USSR Murray Feshbach and Ann Rubin 68 5 Social Policies in the 1980s in Poland: A Discussion of New Approaches Henryk Flakierski 85 6 Economic Reform and Changes in the Welfare System in Poland Zbigniew M. Fallenbuchl Recent Trends in Social Policy in Hungary Zsuzsa Ferge Economic Reform and New Employment Problems in Hungary lands Timar 156 Index 177 v

6 List of Tables 3.1 Food prices in urban collective farm markets Some indicators of the health system The waiting period for state-owned fiats Major characteristics of the housing conditions Utilisation of potential manpower capacities Structural employment changes Job openings and job seekers Utilisation of the employment fund in percentages Public opinion unemployment poll 172 vi

7 List of Figures 8.1 Economic activity rate of the population by sex and age groups in Changes in employment in Hungary and European Economic Community countries Changes in employment in the branches of the material sphere 167 vii

8 Acknowledgements I would like to express my appreciation to the University of Calgary Research Grants Committee for the financial contribution which enabled the work on the book to be carried out. I would also like to thank Professor Merlin B. Brinkerhoff, Associate Vice President for Research, whose help and encouragement contributed to the realisation of the volume. Finally, I would like to express thanks to Mrs E. Blackman for improving the English of some of the contributions, and to Mrs S. Langan for her care in typing a number of the chapters. JANADAM Vlll

9 Notes on the Contributors Jan Adam, the editor, is Professor Emeritus of Economics at the University of Calgary, Canada. Born in Czechoslovakia, he received his doctorate and candidacy of economic sciences from Chades University, Prague, where he was Dozent up to He is the author of several books, inter alia, Wage Control and Inflation in the Soviet Bloc Countries and Economic Re/orms in the Soviet Union and Eastern Europe since the 1960s. Janet G. Chapman is Professor of Economics at the University of Pittsburgh, where she has also served as Chair of the Economics Department ( ) and Director of the Russian and East European Studies Programme ( ). Her Ph.D. is in Economics from Columbia University, Her publications include Real Wages in Soviet Russia since 1928, Wage Variation in Soviet 1ndustry, 'Gorbachev's Wage Reform', Soviet Economy, vol. 4,1988, 'Income Distribution and Socialist Justice in the Soviet Union', Comparaiive Economic Studies, vol. XXXI, no. 1. Elizabeth Clayton is Professor of Economics and Associate Vice Chancellor for Research at the University of Missouri, St Louis. She is president elect of the Association for Comparative Economic Studies and former president of the Midwest Economies Association. She has published numerous artieies on the contemporary Soviet economy. Zbigniew M. Fallenbuchl is Professor of Economies and Dean of Social Sciences at the University of Windsor, Canada. Born in Poland, he received his B.Sc. from the University of London, an M.A. from the University of Montreal, his Ph.D. from McGill University, and D. honoris causa from the Universite de Droit, d'economie et des Sciences d'aix-marseille in He has published extensivelyon Soviet and East European economies, partieulady on the Polish economy. Zsuzsa Ferge was born in 1931 in Budapest, worked first in social statisties, then turned to sociology and social poliey. She is currently ix

10 x Notes on the Contributors Professor of Sociology at Eötvös University where she is Head of the Department of Social Policy. She has published eight books (one in English: A Society in the Making: Hungarian Social and Societal Policy, ), edited six (one in English), and published over fifty papers. Murray Feshbach has been Research Professor since 1981 at Georgetown University Washington. Previously he was the Chief of the USSR Population, Employment and Research in the USA Bureau of the Census. He was a member of working groups under the US-USSR Agreement on Science and Technology. His M.A. is from Columbia University and his Ph.D. from the American University. He has published extensivelyon the Soviet population situation and on trends in employment, manpower management, health care, and the environment. Henryk Flakierski is Professor of Economics at the University of York (Canada). He has published several books and numerous articles about income distribution in East European countries. He is now involved in a broad project about Gorbachev's Economic Reform and Income Distribution. Ann Rubin received her B.A. in Russian Studies from William Smith College in 1983 and has an M.A. in Russian Area Studies from Georgetown University, Washington. Since completion of her graduate work in 1988, she has worked as a Research Associate with Dr. Murray Feshbach at Georgetown University, with whom she has published jointly. Janos Timar is Professor at the Department of Labour and Education Economics of the Karl Marx University of Economics in Budapest. He specialises primarily in employment and educational aspects of the Hungarian economy, and is the author of many publications in Hungary and abroad. His book Planning the Labour Force in Hungary was published in the United States. His latest major book deals with time and work time.

11 Preface The social welfare system which was gradually built up in the post NEP era in the USSR and later embraced by East European countries (as they were called until recently) was an integral part of the building of socialism in those countries. * This system has been regarded as socialist for two reasons. On the one hand, programmes, aimed to ensuring incomes and health care for aged, ill, weak, and disadvantaged people, at protecting people against possible unemployment and at mitigating income inequalities stemming from different incomes and number of children, were first advocated by socialists and are often associated with socialism. On the other hand, the way in which most of the programmes have been organised and implemented, mainly the fact that some of them have been so conceived that social aspects have been given priority over economic and market rationality, and thus has definitely separated them from social programmes in capitalist countries, has made them distinctively socialist. The welfare system built up in this way can be regarded as part of a package deal- a social contract - between the regime and the people. The latter accept the regime, though it is not the result of democractic will, and in return the government vows to provide a welfare system containing - to mention some important components - social security, health care, and subsidised prices for important consumer goods, utilities and housing. The social contract also promises the right to a job and more equal distribution of incomes. The latter can be regarded as a manifestation of social justice rather than as social welfare, while the c1assification of the right to a job is surely controversial. Some argue that it is also a matter of welfare, others that it is a human rights issue. For simplification, I will call all the mentioned components of the social contract social welfare in the broad sense, whereas welfare in the narrow sense does not inc1ude the right to a job or more equal distribution of incomes. If not otherwise indicated, the term 'welfare system' is always meant in its broader sense. NEP stands for New Economic Policy; it is used as a name for the phase of development in the USSR from 1921 to In this phase, market forces were allowed to play an important role after they had been eliminated during War Communism, aperiod which preceded NEP. xi

12 XlI Preface In the second half of the 1980s, Poland and Hungary committed themselves to establishing market economies. In 1989, Czechoslovakia joined these two countries. It seems that the USSR will go in the same direction. Once it is decided drastically to overhaul the economic system, especially if this me ans the transition to a market economy, then questions arise about the social contract and the welfare system. Some of its components, such as the right to a job, the use of prices to solve social problems and excessive narrowing of wage differentials for skill are contrary to the traditional working of a market economy. The transition period will necessarily make deep inroads in these programmes, all the more because the change will also involve a restructuring of the economy. The right to a job will be the first victim; the needed restructuring of the economy can hardly be achieved without unemployment. The political forces which are at the helm nowadays in the countries under review are no longer genuinely committed to full employment. Some believe that unemployment is an integral part of a working market economy, others see it as an important instrument for disciplining workers. A market economy, which is based to a great extent on private ownership, needs and creates more powerful incentives than exist under a socialist system. Private enterprise and competition, especially if they are combined with the elimination of income controls, necessarily lead to a widening of income differentials, which in turn may act as strong incentives. A properly working economy needs a rational price system, a system which, among other things, is more or less neutral to social problems. The Soviet Union and East European countries are, in addition, in a precarious economic situation, inter alia because of the budget deficit. Under such conditions, the welfare system even considered in its narrow sense, presents a burden. Regardless of the budget deficit, some believe that the social programmes are excessive and should be substantially scaled down, and that the state should be less involved in taking care of social problems. If people are forced to care more about their own well-being, it is argued, this will encourage them to have greater initiative and perform better. There are, of course, other reasons why the welfare system has been given considerable attention recently. With the political changes and a relatively free press, it has become possible to write openly and it transpires, as was always elear to elose observers, that apart from its good points - understandably stressed excessively by politicians of the old regime - the welfare system in its existing form

13 Preface xiii has many dark aspects. Indeed, the broadly designed welfare system on the one hand together with the great stress laid on the production sphere, especially heavy industry and armaments, have led to the neglect of some of the important components of the welfare system mainly the delivery of health care services (in the USSR in particular the health situation is unsatisfactory and all the countries under review have remained far behind in the great revolution in health technology). There has been a gap between the promises and their implementation, notably with regard to equity. In the design of some programmes, economic rationality was largely disregarded, inter alia priority was given to solutions which in the short run did not cost much but were used at the expense of solving long-term problems and hardships. The approach to the housing problem is a good example. As already mentioned, some programmes constitute obstacles to marketisation of the economy. The design and organisation of the welfare system, for instance, was determined from above in the USSR and later embraced in East European countries with few modifications. Ordinary people had little say in its design format or implementation. The attention given to the welfare system at present is an integral part of the ongoing criticism of the old regime. Some believe, however, that this is also aimed at blackening the welfare system in order to soften public resistance to impending cuts in welfare programmes. Being aware of the importance of the welfare system and its possible development, five of the present contributors to tbis volume decided, in 1988, to organise a roundtable discussion at the annual meeting of the American Association for the Advancement of Slavic Studies which took place in Cbicago, in November 1989, on Economic Reforms and the Welfare System: Social Contract in Crisis. Since we feit that this topic might be of interest to a larger economic community, we subsequently decided to publish our revised papers in the form of a book. To tbis end, we held detailed discussions in Cbicago after the public debate and invited Professors Zs. Ferge, M. Feshbach and J. Timar to join us in contributions to the volume. The purpose of the book is to examine how recent systemic changes in Poland and Hungary, and expected changes in the USSR, affect and will affect the welfare system. This means examining what impact the transition to a market economy, and a democratisation of the political system have and will have on the social contract. The old quid pro quo is no longer valid. The public's part of the contract, to

14 xiv Preface accept the regime although it is not the result of the popular will, is no longer an issue; the two smaher countries have committed themselves to democracy and even in the USSR, where democratic institutions are weakest, tremendous progress in democratisation has been achieved, compared to the pre-gorbachev era. Does this mean that the new regimes are no longer bound by their part of the contract? The welfare system in the narrow sense is mostly applied in developed capitalist countries and has become an integral part of modern society. It is doubtful whether the new regimes, even in Poland and Hungary where the neo-liberals and conservatives respectively hold power, can disregard this fact. Even if they wanted to, they could not do so, since the public has already become used to certain programmes and will not tolerate their elimination or excessive scaling down. This does not mean that the organisation of the welfare system, in the narrow sense, and its financing will not change. As will be shown in the country studies, some provisions have already been made in Poland and Hungary, and many, more substantial ones will fohow in order to bring the welfare system, or some of its parts, doser to the rationality of the market, as the new regimes understand it. In addition, price (induding rent) subsidies will certainly be restricted. The right to a job and wage differentials policy, which I have defined as part of the welfare system in the broader sense, will surely also be affected. As previously mentioned, the systemic changes are going on in precarious economic conditions, and these necessarily have an impact on the changes in the welfare system - a fact that will not be overlooked in a volume such as this. To understand the ongoing and impending changes in the welfare institutions, it is necessary to examine their rise, development and connection with the building of the socialist system, as an economic as weh as a political system. And this is also one of the purposes of this book. In addition, the evolution of views on the welfare system is discussed, though this is by no means the main purpose of these studies. There is no study on Czechoslovakia, though it is discussed in the first chapter, since, at the time the papers were discussed, no important movement was noticeable in the welfare system there. When it comes to a contributed volume, there is always the question of the usefulness of coordination and its extent. Two dangers are always present. First, there may be excessive coordination, which is tantamount to putting constraints on the creativity and imagination

15 Preface xv of the authors, a phenomenon which must adversely affect the end product. Secondly, no coordination at ah may produce a product which is not in line with what the title promises. As editor, I have tried to fohow amiddie road. I have encouraged the authors to stick to the topic, but I have not tried to inftuence their approaches to the subject matter. Therefore, this volume is marked by different approaches and, of course, by a variety of views on the same problems. Of the eight chapters, the first, written by the editor, can be regarded as an introduction, in which ah the components of the welfare system, as they developed in the smaher countries after the Communists took power and in the USSR in the post-nep era, are discussed. Of the remaining seven chapters which deal with recent developments in the welfare system, three are devoted to the USSR and two each to Poland and Hungary. The structure of country studies is not the same in each case. The specialisation and interest of the authors has naturahy had an imprint on strueture. As a result, some topies are diseussed more than others. On the whole, it is possible to say that social welfare in the narrow sense takes a eentral role in most eountry studies. In Chapter 2, J. Chapman deals with most of the topies arising in the book as far as they refer to the USSR. E. Clayton, the author of the third ehapter, analyses food priees as weh as housing poliey in rural areas. Housing in urban areas is diseussed by J. Chapman in her chapter. Chapter 4, which deals with health care in the USSR, is diseussed by M. Feshbaeh and A. Rubin. The ehapters on Polish welfare (5 and 6) are written by H. Flakierski and Z. FaHenbuehl. The former covers the debates on the welfare system in Poland as weh as priee subsidies and wage differentials, whereas the latter diseusses ah other problems pertinent to the welfare system in the broader sense, including employment poliey. Zs. Ferge and J. Timar are the authors of the Hungarian studies. Zs. Ferge diseusses the welfare system in the narrow sense with the exeeption of priee subsidies, which are briefty diseussed by J. Timar, whose eontribution is primarily devoted to employment polieies. November 1990 JAN ADAM